Fleetboston Financial Corp.. N/K/A Bank of Am. Corp.. v. Alt

• Decision Date: 23 March 2011
• Docket Number: No. 10–1035.,10–1035.
• Citation: 638 F.3d 70
• Parties: FLEETBOSTON FINANCIAL CORPORATION n/k/a Bank of America Corporation; Robertson Stephens Group, Inc., Counterdefendants, Appellees,v.Eric E. ALT, et al., Counterplaintiffs, Appellants.
• Court: U.S. Court of Appeals — First Circuit

638 F.3d 70

32 IER Cases 47

FLEETBOSTON FINANCIAL CORPORATION n/k/a Bank of America Corporation; Robertson Stephens Group, Inc., Counterdefendants, Appellees,

v.Eric E. ALT, et al., Counterplaintiffs, Appellants.

No. 10–1035.

United States Court of Appeals, First Circuit.

Heard Nov. 1, 2010.Decided March 23, 2011.

S. Elaine McChesney, with whom Alicia L. Downey, Laura K. Langley, and Bingham McCutchen LLP were on brief, for appellees.Arthur R. Miller, with whom Jeffrey L. Liddle, James R. Hubbard, Michael E. Grenert, Liddle & Robinson, LLP., J. Owen Todd, Kevin T. Peters, Edward F. Foye, and Todd & Weld LLP were on brief, for appellants.Before LYNCH, Chief Judge, HOWARD, Circuit Judge, and DiCLERICO, ^* District Judge.LYNCH, Chief Judge.

The district court confirmed an arbitration award and later entered summary judgment against the assertion of certain compensation claims on the theory that they had been disposed of in the arbitration proceeding. Although the arbitral plaintiffs achieved a large measure of success in the arbitration, they appeal, arguing they should be free to further litigate their compensation claims in court. We disagree and affirm.

The underlying dispute involved the employment claims of a group of forty-two former employees of Robertson Stephens, Inc. (RSI), and was the subject of the longest arbitration ever held before the New York Stock Exchange (NYSE). Because the lead plaintiff in arbitration was Eric Alt, we refer to the appellants collectively as ALT, as do the parties. ALT asserted claims in arbitration under various theories of liability for over $140 million in damages. The arbitral panel heard many witnesses over two years and awarded over $14 million plus interest to twenty-seven of the forty-two ALT claimants. Fifteen claimants received nothing.

A subset of ALT's employment claims were stayed in federal court during the arbitration. After it had confirmed the arbitration award, the United States District Court for the District of Massachusetts was asked to enter summary judgment against ALT on these stayed claims. The essential question was whether the confirmed arbitral award precluded the forty-two ALT claimants from pursuing in court claims against Robertson Stephens Group, Inc. (RSGI), the owner of RSI, and FleetBoston Financial Corporation (Fleet),¹ itself the owner of RSGI, for deferred compensation under two agreements: (1) a cash equivalent plan (CEP) of deferred cash compensation awarded to five ALT claimants in 2000 and to thirty-six in 2001, and (2) a restricted stock unit plan (RSU) awarded to all forty-two claimants in the form of restricted stock units that could be converted to an equal number of RSGI shares.

These deferred compensation claims had clearly been before the arbitrators as to RSI, and ALT had named Fleet and RSGI themselves as parties to the arbitration proceedings, although both denied the panel had authority over them. ALT also advanced a variety of alternative theories as to why the arbitral panel could hear the deferred compensation claims regardless of whether Fleet and RSGI were parties to the arbitration proceedings, including that RSI was an alter-ego of RSGI and that RSI was itself liable for payment under the compensation plans.

The district court, construing the arbitral award, concluded that judgment should enter against ALT on its deferred compensation claims because it read the arbitral award as saying both (1) that the essence of those claims had been litigated during the arbitration proceedings, and (2) that RSGI and Fleet were parties in the arbitration proceedings. ALT now appeals.

We affirm. It is clear that the arbitral award did decide the essence of ALT's two deferred compensation claims against RSI, RSGI, and Fleet. ALT's belated attempt to seek remand to the arbitration panel for clarification of the award after the district court had confirmed that award was simply too little too late. This conclusion is consistent with traditional res judicata principles.

I.

We truncate our description of events to the minimum needed to explain our reasoning.

ALT is a group of forty-two former employees of RSI, an investment banking firm and wholly owned subsidiary of RSGI, which was itself a wholly owned subsidiary of Fleet. Fleet began winding down RSI's operations in July 2002.

In December 2002, ALT filed NYSE arbitration claims against respondents Fleet, RSI, RSGI, and Fleet Securities, Inc. (FSI), another Fleet subsidiary, for breach of promises to pay bonuses in 2001 and 2002; violation of the Worker Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. §§ 2101–2109; severance pay; violation of state wage statutes; and fraud, negligent misrepresentation, and breach of fiduciary duty. ALT's Statement of Claims aggregated the four respondents together and did not differentiate its claims between them. FSI was dismissed as a party in January 2005.

As a NYSE member firm, RSI was required to arbitrate, and it filed an Answer to ALT's initial Statement of Claims in March 2003. Subsequently, RSGI informed ALT that the employees had triggered the forfeiture provisions of the CEP and RSU deferred compensation plans they had been issued,² and that it did not intend to pay ALT under either plan. This led ALT to file an Amended Statement of Claims, which included claims for breach of the CEP and RSU contracts against all respondents. Like ALT's original claims, these claims did not differentiate among the respondents.

RSI responded to ALT's Amended Statement of Claims in July 2003. While RSGI did not itself answer ALT's claims, RSI—whose counsel also represented RSGI—attempted on several occasions to dismiss RSGI and Fleet from arbitration on the grounds that neither were “members, allied members, or member organizations” of the NYSE and that neither had agreed to arbitrate. ALT opposed each of RSI's attempts to dismiss RSGI and Fleet. The arbitration panel never acted upon RSI's motions that RSGI be dismissed.

Concurrent with these early stages of the NYSE arbitration, Fleet, RSI, RSGI, and FSI filed an action against ALT in Suffolk Superior Court in March 2003, seeking, inter alia, a declaratory judgment and a stay of the arbitration as to RSGI and Fleet, again on the basis that neither RSGI nor Fleet were NYSE members and that neither had agreed to arbitrate.

ALT removed the action to the United States District Court for the District of Massachusetts on the basis of federal question jurisdiction. The district court declined the request of the litigation plaintiffs (the arbitration respondents) to stay the arbitration as to RSGI and Fleet, and instead stayed its own proceedings pending final resolution of the NYSE arbitration.³

Although the federal proceedings were stayed as of April 2003, in June 2004 ALT successfully sought leave to file counterclaims, including claims pertaining to the CEP and RSU plans. ALT sought leave on the basis that if the NYSE arbitration panel ultimately determined that it lacked jurisdiction over one of the arbitration respondents, ALT's claims against them could be barred by the applicable statute of limitations. The entry of judgment against ALT on those counterclaims is the subject of this appeal.

After the district court declined RSI, RSGI, FSI, and Fleet's request for a stay of the arbitration but before taking evidence itself, the arbitration panel, at the request of both sides, sought clarification from the district court as to whether its order required RSGI and Fleet to arbitrate. The district court issued a responsive subsequent order stating that its initial order had not required RSGI or Fleet to arbitrate and that, in its view, whether the two were required to arbitrate was an issue properly left for the federal district court for the Southern District of New York. ALT never sought an order from the Southern District clarifying whether RSGI was required to arbitrate.

The hearings in the arbitration began in January 2005. RSGI and Fleet continued to maintain they could not be forced to arbitrate. ALT, by contrast, argued that the arbitrators had jurisdiction over RSGI and Fleet. ALT also argued that even if RSGI and Fleet were not parties, each of ALT's claims could be levied against RSI, which was unquestionably a party, and therefore could be resolved by the panel. First, ALT argued that “RSI, RSGI and Fleet were so interconnected that the actions of Fleet and RSGI can be imputed to RSI under a number of principles, including agency, alter ego, and single employer doctrines.” Second, ALT argued that because the CEP and RSU plans were compensation promised to ALT by RSI in exchange for services performed for RSI, RSI could be held in breach of contract for RSGI's alleged failure to honor the plans. Finally, ALT argued that RSI could be held liable for the CEP and RSU claims because RSI's arbitration agreement with its employees extended to all employment claims against RSI or “its current or former agents, affiliates or employees,” thus rendering RSI liable for those claims. Significantly, ALT asserted no claim against RSGI or Fleet that they were liable independent of any liability of RSI.

The arbitration proceedings lasted more than two years and included testimony from fifty-nine witnesses and the submission of over four thousand exhibits. Each of the ALT claimants presented evidence regarding the CEP and RSU claims to the arbitration panel. Fleet representatives also testified extensively on the subject of those plans. ALT's cause of action in arbitration relating to the deferred compensation plans was the same cause of action ALT later asserted against RSGI in federal court, and these issues clearly fell within the scope of the issues to be arbitrated under the contract.

On September 12, 2007, the arbitration panel issued a decision that constituted a “full and final settlement of all claims between the parties,” and that awarded twenty-seven of the forty-two ALT...